Let's rule out this daft talk of merger with the Liberals

The trouble with this strategy is that it is founded on a complete ignorance of British history

HOW TYPICAL that Labour should feel that the best way of resolving our current difficulties is a "relaunch". Rational people, faced with a series of disasters on the scale that Labour has suffered in recent weeks, would be more likely to consider it worthwhile to examine why these problems have occurred, before they decide how to respond to them. Labour Party members and MPs have been lectured for years about the need for restraint and self-discipline for fear that public policy rows may damage our standing in the polls, yet almost all the real damage inflicted on Labour has come from the very top of the party.

The party machine launched a major exercise to ensure that the Labour leadership did not lose a single vote at last year's party conference, largely by the expedient of allowing only votes the leadership could win. But we have to ask ourselves what would have been more damaging for the Labour Party: honest debates at the conference on issues such as taxation, the NHS and Iraq, or problems raised by Harriet Harman's choice of school for her children, the Bernie Ecclestone affair, Derek Draper's cash for access scandal, and Notting Hill Gate.

Some of our problems stem from the fact that Tony Blair has allowed the impression to grow that he may be prepared to stand down as Prime Minister during his second term. I have always dismissed this idea as rubbish. Why on earth should a successful prime minister stand down from the most exciting and challenging post in British politics when he is barely 50 years old? I wouldn't be surprised if Tony Blair ends up beating Clem Attlee's record of 20 years as Labour leader, at the age of 61. I may even be able to look down at him delivering a graveside eulogy at my own funeral!

It's about time Tony Blair knocked all this nonsense on the head by letting it be known that he has no plans for early retirement, and ministers should concentrate all their energies on the task of re-electing this government. Tony Blair should also start to loosen up the present obsessive opposition of the party machine to frank and honest debates about issues of policy. In this case the place to start is at the top. Instead of the present 30-minute Cabinet encounter-group-style feel-good experience, whereby ministers rubber-stamp what Labour's Big Three have already agreed, we should revert to full discussion across the whole range of policy. Until some ghastly little creature in the Millbank Tendency comes up with constitutional proposals for presidential government, our constitution is still based on the concept of Cabinet government, with the Prime Minister as first among equals.

But far and away the most important issue that Tony Blair needs to resolve is the question of our relationship with the Liberal Democrats and the trade unions. More than anybody else, Peter Mandelson is the figure identified with "The Project", a strategy aimed at severing Labour's links with the trade unions and undertaking a full merger with Paddy Ashdown's Liberal Democrats. The fullest expression of this strategy appeared in Philip Gould's recent book, The Unfinished Revolution: "the better course would be for Labourism and Liberalism to unite. But this will not be easy. It will require the Labour Party to be generous, to reach out to a smaller party when in a position of great strength."

It would be easy to dismiss Philip Gould's writings. He has never been elected to any public office or even sought election to Labour's NEC, but he remains one of the half a dozen most important figures around Tony Blair. His analysis of polling figures and his conduct of Labour's focus groups have been the basis for Labour's electoral strategy. His memos have rained down on Tony Blair from the very beginning of Tony's campaign to gain the Labour leadership, and even a cursory reading of his book reveals that they have almost always formed the basis of Tony Blair's electoral strategy.

Tony's speech to the 1997 party conference seemed to endorse Gould's strategy: "division among radicals almost 100 years ago resulted in a 20th century dominated by conservatives".

The trouble with Gould's strategy is that it is founded on a complete ignorance of British history. It was not the rise of the Labour Party that led to the downfall of the Liberals, because the Liberals had been in electoral decline for half a century before the Labour Party was established in 1900. The reasons for this are clear. The Liberals were the party of classical laissez-faire capitalism - as they could afford to be in an era when Britain dominated the world economy. The rise of the American and German economies meant that it was essential for British capital to protect itself, turning to the Conservatives who had a strongly protectionist slant, expressed in the concept of imperial preference for British firms within the empire.

The fate of the Liberals was sealed in the 1886 split, when Liberal Unionists crossed the floor of the House in opposition to Irish Home Rule and fused with the Tories, whose vote then rose inexorably to a peak of 55 per cent in the 1931 general election. Like most parties in decline, the Liberals exacerbated the process by personality conflicts and internal leadership struggles.

The creation of the Labour Party was not some unfortunate sectarian error. It was inevitable that a new party would rise to fill the void left by the Liberals and inevitably that party would define itself in terms of its relationship to the Tories. If the Tories were to represent capital, then as night follows day the new party would be based on the trade unions, particularly as this coincided with the enfranchisement of growing numbers of working-class people. Labour's success was that it gradually came to represent both working-class and middle-class interests, and created a welfare state that benefited both.

Even if Labour were now to fuse with the Liberal Democrats, it would not produce the result that Gould wants. Millions of Liberal Democrat voters would be likely to switch to the Tories rather than vote Lab-Lib, thus making it more rather than less likely that the Tories could return to power. By contrast, if the Liberal Democrats remain a separate political party, then in Labour's bad years they could find themselves holding the balance of power.

Tony Blair could ease a lot of the suspicion amongst Labour's rank and file by unequivocally ruling out any merger with the Liberal Democrats.